Finance Reform Lacks Civil Courage

Finance Reform Lacks Civil Courage

Yesterday on BreakPoint, we talked about the disconnect between the people and government leaders. It is clear that folks are frustrated today because politicians aren't listening to their concerns.

Worse yet, it seems government is incapable of governing well. From the response to Katrina to keeping a terrorist with a bomb in his underwear off a U.S. airliner to stopping illegal immigration—government's job biblically is to maintain order.

Or take financial reform. Enormous ethical lapses on the part of lenders, bond raters, speculators, and home buyers led to the financial crisis. So Congress is forced to step in with new regulations, as we noted yesterday.

The problem is that Congress is ignoring two of the major causes behind the financial crisis.

The first is the bond-ratings agencies. Yesterday's Wall Street Journal reported that companies are still engaging in the un-ethical practice of "ratings shopping."

Here's how it works: If you want to issue bonds to finance a project, you go to a ratings agency like Standard and Poor's or Moody's. You have them rate the quality of your bonds. Of course, you want a Triple-A rating because that tells investors your bonds are safe.

Well, the problem is that you pay the ratings agencies to rate your bonds. If one agency doesn't give you a rating you like, you simply go to another agency. That's "ratings shopping." And it's big business. The top three rating agencies made $3.6 billion last year on fees.

But what happens when agencies rate a bond as Triple-A, when it's really a piece of junk? Investors are left holding the bag. That's what's happened over the past two years.

In a world where people understand ethics—that is, the value of doing the right thing—ratings shopping is called a "conflict of interest." In today's world, however, it's called "business as usual." And although the Senate bill does contain some provisions to regulate this unethical practice, the House bill ignores it.

Then there are Fannie Mae and Freddie Mac—whom the Journal calls "the toxic twins of the mortgage industry." These agencies guaranteed nearly 97 percent of all new home loans last quarter. And although Fannie and Freddie were the key causes of the financial collapse, the finance reform bill doesn't touch them.

They're gushing losses like the oil well in the gulf is spewing crude. And the government is doing about as much to stop the flow with Fannie Mae and Freddie Mac as it's doing off the coast of Louisiana. That's because Fannie and Freddie are major political contributors and because regulating Fannie and Freddie would end up raising costs for the average home buyer. Incumbents have little interest these days in annoying already angry constituents.

So what we're experiencing now is double trouble. First, a lack of ethical behavior in the private sector. Second, the lack of what Dietrich Bonhoeffer—commenting on the rise of Nazism and the collapse of the German state—called "civil courage" on the part of government leaders to do the right thing.

In the coming months, you will hear me talk a lot about the importance of ethics, which are rooted in the Judeo-Christian revelation. Princeton professor Robby George, former Fox anchor Brit Hume, and I are filming a video series. The more I study, the more convinced I am that the loss of ethics in our relativistic society is the root cause of our economic collapse. And we'd better summon the courage to do the right thing if we expect to keep our liberty.

Chuck Colson's daily BreakPoint commentary airs each weekday on more than one thousand outlets with an estimated listening audience of one million people. BreakPoint provides a Christian perspective on today's news and trends via radio, interactive media, and print.